Officials Want Nevada Utilities to Pay Back Profits from Western Power Crisis

Officials Want Nevada Utilities to Pay Back Profits from Western Power Crisis

By John G. Edwards, Las Vegas Review-Journal -- Mar. 13

California utilities and state officials are urging federal regulators to force Nevada's investor-owned utilities to pay back $15.6 million in profits from wholesale trading during the Western power crisis.

The request came in written testimony from Gary Stern of Southern California Edison Co. He urged the Federal Energy Regulatory Commission to order about 60 entities, including utilities, energy companies and government agencies, to pay back $2.79 billion in profit from trading power in California during the summer of 2000.

Stern, an economist with a doctorate, submitted written testimony in late February on behalf of Edison, the California attorney general, California Public Utilities Commission and Pacific Gas & Electric. As reported earlier, another expert witness, in written testimony filed with the federal commission for the California parties, accused the Colorado River Commission of helping Enron Corp. game the Western power markets.

Stern recommended that FERC require Nevada Power Co. of Las Vegas to pay back $13.6 million from its trading profits in California during the crisis. He recommended that Sierra Pacific Power Co. of Reno pay back $2 million.

A summary explains that Stern believes the river commission should return "any and all profits from its partnership gaming activities with Enron as this is the only measure of profits available for CRC." Stern didn't estimate profits that the river commission may have made from trading power.

Stern said Enron, which is now bankrupt, should pay back $145.3 million under one method of estimating profits. But he also used another method to calculate the questionable profits which suggested Enron should pay back $1.1 billion. Stern argued that FERC should order Enron to pay back the higher of the two amounts.

"Enron was not alone," Stern testified. "Dozens of other market participants pervasively engaged in Enron-type gaming behavior, physical withholding, anomalous bidding and other unlawful behavior."

Stern's exhibit lists about 60 organizations, including Reliant Energy Services, Mirant Corp., Duke Energy Trading & Marketing, Bonneville Power Administration and the Western Area Power Administration (which has offices in Boulder City). Valley Electric Association, the cooperative based in Pahrump that was dismissed from the FERC case, isn't on the list.

Nevada Power and Sierra Pacific Power are on the list. However, Roberto Denis, vice president of the utilities' holding company, Sierra Pacific Resources, said Stern was not accusing the organizations on that list of being among the dozens that "engaged in Enron-type gaming behavior."

Denis said Stern was referring to a list of 25 entities that FERC earlier identified as potential partners with Enron. Many on the list of 25 have been dismissed or have settled without admitting guilt, but allegations against the river commission, PNM Resources of New Mexico and Enron remain unresolved.

Others disagreed with Denis and said Stern was referring to his own list when he said dozens "engaged in Enron-type gaming."

"Clearly, many entities in the marketplace at that time had unclean hands to one degree or another," said Tim Hay, state consumer advocate. "It may not have been criminal activity, but I think the gaming of the market was widespread."

Evidence would suggest that many organizations, including the Nevada companies, did participate in questionable trading, he said.

Under state law during the summer of 2000, the $15 million profit from trading would have benefited shareholders of Sierra Pacific Resources, not customers of its two electric utilities, Hay said.

George Caan, river commission executive director, declined comment on Stern's testimony.

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